MYANMAR – What You

Need to Know Before

Investing

By: Kelvin Chia Yangon Ltd

Copyright: Kelvin Chia Yangon Ltd

This document is intended only for IE Singapore and should not be distributed to any other
person or entity.
Introduction:
Kelvin Chia Yangon Ltd
• Part of the network of law firms of Kelvin Chia Partnership (“KCP”),
a regional law firm headquartered in Singapore with offices and
transactional experience throughout Southeast Asia
• Established in 1995: the oldest foreign legal consultancy firm based
in Yangon
• Full range of corporate and commercial services
• Substantive experience in transactional work, particularly in cross-
border issues and in Myanmar’s key industry sectors
• Assists and advises clients on investment structures and the setting
up of investment vehicles, including provision of corporate
secretarial services
• Seamless combination of international and local legal expertise with
local Myanmar team working in conjunction with
foreign/international lawyers from the KCP network
Today’s Agenda
1. Current Myanmar
Investment
Framework

2. Key Steps in
Investing in
Myanmar

3. Significant
Issues/Aspects

4. Q & A Session
Has the new Foreign Investment Law been enacted?

Should I wait for it to be passed before investing?

Is there an existing legal framework for investing now?

General Legal Framework
for Investing in Myanmar
Key mainframe laws to consider:

• State-Owned Economic Enterprises Law (“SOEEL”)

• Foreign Investment Law (note: MIC permit)

• Companies Act (note: permit to trade and registration)

• Note: Relevant rules, regulations, notifications and internal

directions/policies, as well as industry/sector-specific laws, should
also be considered.
General Legal Framework
for Investing in Myanmar
IS THE INDUSTRY/SECTOR CONCERNED RESERVED TO
STATE-OWNED ENTERPRISES?

• Reserved industries/sectors are listed in the SOEEL.

• 12 industries/sectors are listed in the SOEEL.

• If a reserved industry/sector, then foreign investment may still be

possible with the approval of the Myanmar Government.

• Joint venture between state organization/enterprise; citizen

and/or foreigner
• Any person or economic organization subject to prescribed
conditions
• Other forms of collaboration, e.g., production sharing
Reserved industries/sectors under the
SOEEL
• Extraction and sale of teak • Postal and telecommunications
services
• Forest plantations
• Air and railway transport services
• Exploration, extraction and
sale of petroleum and • Banking and insurance services
natural gas, and • Broadcasting and television
production of the products services
of the same • Exploration, extraction or export
of metals
• Exploration, extraction and
export of pearls, jade and • Electricity generation services
precious stones • Manufacture of products relating
to security and defense
• Certain kinds of breeding
and production of fish and
prawn
Note: There may be additional reserved sectors which
are not otherwise on the list (e.g., education, trading).
General Legal Framework
for Investing in Myanmar
SOME KEY POINTS TO CONSIDER UNDER CERTAIN
CURRENT INTERNAL POLICIES/DIRECTIONS

• General classification of business activities into the following:

• Industrial (manufacturing)

• Services/Construction

• Trading

• Currently, trading activities are reserved to Myanmar nationals and

companies wholly owned by Myanmar nationals.
Investing under the Foreign
Investment Law (FIL) – main General Legal
criteria for investment: Framework for Investing
• Support the national economic development in Myanmar
plan
• Opening up of more employment
opportunities The Myanmar Investment
• Increase exports Commission
• Production for import substitution
• Formed under the Foreign
• Production of products which require heavy
investment Investment Law
• To develop high-skill technology and • Reviews investment
develop advance technology for production proposals
• Development of the manufacturing and • Issues MIC Permit and
services sector requiring heavy capital
Decision
• Businesses which would save energy
consumption
• Exploration/Production of new energy and
renewable energy
• Development of modern industries
• Conservation of the environment
Incentives under the Foreign
Investment Law (1988)

Tax Holiday

• 3 years from commencement of commercial production*

Exemption of Tax on Profits which are

Reinvested
• If they are maintained in a reserve fund and re-invested
therein within 1 year after the reserve is made

Reduction of Tax on Profits from Export

• up to 50 percent on the profits accrued from exported goods

Incentives under the Foreign
Investment Law (1988)
Accelerate Depreciation

• at the rate fixed by the MIC*

Payment of taxes for Expat Employees

• At rates applicable to citizens

• Deductible from assessable income

R&D expenses

• Deductible from assessable income

Incentives under the Foreign
Investment Law (1988)
Carry forward losses

• Carry forward losses for 3 consecutive years

• If losses are sustained within two years after the
initial tax holiday

Tax exemption on Imports

• Imported Equipment and Materials used in

business for the period of construction and for the
first 3 years of commercial production*
Given the existing investment framework, what are the key
steps/procedures for investing?

Do I have to go to the MIC or not?

Key Steps in Investing in Myanmar
1. Define your intended business activity in Myanmar

2. Identify the relevant ministries/authorities in charge of

the business sector/activity

3. Establish contact with the relevant ministries/authorities

(need for endorsement/no objection for the investment
applications)

4. Determine the appropriate entity to be established in

Myanmar

Note: Sourcing for local partners and land ahead, where applicable, is
also critical.
Key Steps in Investing in Myanmar
DEPENDING ON THE NATURE AND REQUIREMENTS OF
THE PROPOSED BUSINESS ACTIVITY/INVESTMENT, AN
INVESTOR MAY TAKE EITHER OF TWO “ROUTES” IN
GENERAL:

• MIC route (with MIC Permit)

• Industrial (manufacturing)
• Reserved sectors
• Services

• Companies Registration Office (“CRO”) route (without MIC Permit)

• Only for services company and branch/representatives offices

• Note on branch/representative offices in Myanmar
Key Steps in Investing in Myanmar

• Under the Foreign • Under the

Investment Law Companies Act
• Reserved • Service
sectors/industrial companies/branches
• Long-term lease • One-year lease
• Import licence • No import licence
• Tax incentives/ • No tax
guarantees incentives/guarantee
• Minimum capital s
requirement • Minimum capital
requirement
MIC and Incorporation Regulated by the
Foreign Investment
Myanmar
Law which is
Investment Commission
Approval administered by the
MIC

Establishing Establishing
a Company a Branch Office

Cabinet Regulated by the

Committee Applying for a Myanmar Companies Act
Permit to Trade and Administered by the
With the CRO
Executive Directorate of Investment
(Business License)
Committee and Company
Administration under the
Ministry of National
Registering Company or Branch Office
with the CRO
Planning and Economic
Development
Is the MIC a one-stop shop?
Ministerial support/Ministerial submission
How long is the MIC application process?
What are the documents to be submitted to the MIC?
Economic Justification/Draft Contracts
Is there any situation where I do not have to go to the MIC?
Corporate Vehicles
Is an MIC What is the Are tax
Type of
Activities Permit minimum Incentives Tax Status
vehicles
required capitalization available

Private Resident
Industry Yes US$500,000 Yes
Company foreigner

US$300,000
Depending on Resident
with an MIC Yes
the needs of the foreigner
Private Permit
Services business – land
Company US$50,000
lease and Resident
without an MIC No
import of goods foreigner
Permit

Branch Representative Non-resident

No US$50,000 No
office office/ Services foreigner
Is a wholly foreign owned entity allowed for investments?

Can I enter into joint ventures?

Minimum 35% foreign shareholding requirement
Joint ventures may be preferred/encouraged in certain sectors
Key Challenges for Joint Ventures
• Sourcing for appropriate local partners

• Conducting due diligence

• Structuring the joint venture

- Current restriction on direct acquisition of shares in wholly
Myanmar-owned local companies)
- Onshore versus offshore

• Dispute resolution
Significant Issues/Aspects
• Land

• Employment

• Foreign Exchange

• Dispute resolution
Dealings in Land
• Foreigners may not purchase/own land
• Foreign-owned companies with an MIC permit
may obtain long-term leases (up to 60 years in
total; longer period is possible in SEZ)
• Under Notification 39/2011, foreigners may
lease land from private entities (with
government approval)
• Foreigners and foreign-owned companies
without an MIC permit may lease residential
and commercial units for not more than a year
at a time.
Employment (under the new draft
FIL)
Local hiring requirements

• Unskilled labour: 100%

• Skilled labour: 25% during the first 5 years, 50% during the next 5
years, 75% in the third 5 year period

Training

• Provide training for citizens for skilled positions

Applicable regulations

• Overtime wages, leaves and holidays, workmen compensation,

social security, etc.
• Note on proposed minimum wage law
Termination and Retrenchment
Length of Notice Pay Severance payment
Employment
Less than 3 months -
3 months to 1 year One month’s salary
One month’s salary
1 to 3 years Two months’ salary
More than 3 years Four months’ salary

Notice:
• No legal requirement
• Customary to give one month’s notice
Foreign Exchange Restrictions

Receiving payments
Taking currency out outside of Myanmar
of Myanmar and then using them
outside of Myanmar

Transacting in
Remitting money
foreign exchange
out of Myanmar
in Myanmar
Repatriation with MIC Approval
What may be remitted Conditions for remittance

By permission from the

Net profits after taxes MIC
Remaining funds after Annual Audit /Report
taxes submitted to MIC
Capital where the Application to remit must
company is liquidated be based on the audit report

MIC will specify approved

Damages amount
Dispute Resolution
• Myanmar Arbitration Act
• Myanmar not a party to
Myanmar
the New York
New
Developments
Arbitration Convention –
Act
implications
• Note on developments
re: potential entry of
Myanmar into the New
New York Convention
York Convention
 For more information on investing in Myanmar, please contact:

Marlon Wui, Partner, Kelvin Chia Partnership

marlon.wui@kcpartnership.com +65-6408-7921

U Than Maung, Senior Associate/Advocate, Kelvin Chia Yangon Ltd.

utm@kcyangon.com +951-255-399

We also invite you to learn more about Kelvin Chia Partnership and
its regional capabilities by visiting our website at:

www.kcpartnership.com

Singapore Tokyo Shanghai Bangkok Hanoi Ho Chi Minh City

Yangon Phnom Penh Pyongyang
Thank you for
listening!

We look forward to assisting you in

Myanmar soon.